Brule,
TC].
Issue
The
appeal
of
Colin
C
Mills
is
in
respect
to
the
deduction
of
interest
expenses
claimed
in
his
1981
taxation
year,
a
certain
amount
of
which
was
disallowed.
The
appellant
had
outstanding
loans
with
his
bank
which
he
kept
separate
as
some
were
for
investment
purposes
and
some
were
for
personal
items.
He
obviously
kept
the
loans
separate
so
that
he
might
claim
interest
expense
deductions
where
applicable.
From
time
to
time
he
would
make
capital
payments
and
attempted
to
make
these
on
the
personal
item
loans
while
investment
loans
were
outstanding.
During
the
1978
year,
the
bank
applied
certain
payments
against
the
investment
loans
and
in
1979
combined
the
outstanding
amounts
of
both
types
of
loans.
The
result
of
this
was
that
of
the
balance
still
to
be
paid
part
was
for
investment
and
part
for
personal
use
items.
The
assessment
disallowing
a
portion
of
the
interest
claimed
was
made
and
hence
this
appeal.
The
appellant
documented
for
the
Court
the
history
of
his
loans
dating
back
to
1976
and
undoubtedly
his
intentions
were
always
that
any
personal
loans
be
paid
off
before
reducing
any
investment
loans.
Where
the
confusion
arose
was
explained,
but
the
fact
remained
that
the
bank
applied
capital
to
the
investment
loans
thereby
reducing
the
balance.
The
respondent
introduced
as
an
exhibit
copies
of
letters
from
the
bank
explaining
the
loans
and
the
application
of
capital
payments.
These
clearly
indicated
that
in
1979
the
capital
sum
of
$32,500
was
outstanding
in
the
investment
account
and
that
$18,000
was
transferred
as
of
December
31
of
that
year
to
form
one
consolidated
loan.
The
appellant
produced
for
the
Court
a
reconciliation
of
how
the
investment
loans
totalled
the
amount
outstanding
in
1980
and
suggested
that
he
should
not
be
held
responsible
for
the
bank’s
clerical
errors.
He
could
not
produce,
however,
any
direction
letters
to
the
bank
as
to
the
application
of
the
capital
repayments
nor
was
any
explanation
given
as
to
why
as
late
as
1981
he
did
not
know
that
the
loans
which
had
been
consolidated
in
1979
were
part
for
investment
and
part
personal.
It
seems
strange
that
there
were
no
bank
information
transaction
slips
forwarded
to
the
appellant,
nor
any
discussions
with
the
bank
nor
bank
statements
which
might
have
allowed
the
application
of
the
funds
as
the
appellant
desired.
Where
some
independent
evidence
is
presented
to
the
Court,
such
as
the
letters
from
the
bank
in
this
case,
which
refute
the
evidence
of
the
appellant
then
it
becomes
necessary
for
the
appellant
to
have
his
evidence
corroborated.
It
is
a
question
of
fact
as
to
what
actually
happened
and
here
it
was
that
in
the
relevant
taxation
period
there
were
still
personal
loans
outstanding,
albeit
in
consolidated
form,
and
interest
expense
on
these
is
non-deductible
by
the
appellant.
The
respondent
referred
the
Court
to
the
case
of
Manfred
Holmann
v
MNR,
[1979]
CTC
2653;
79
DTC
594,
a
decision
of
the
Tax
Review
Board
wherein
it
was
said
at
2653
(DTC
595):
“.
.
.
the
Board
should
not
examine
what
the
appellant
could
have
done
with
the
money
but
what
he
did”.
Here,
as
in
all
cases,
the
appellant
has
the
responsibility
to
make
sure
what
happens,
as
it
may
affect
his
taxable
situation,
is
carried
out
correctly.
Even
if
the
bank
misapplied
the
payments
the
appellant
is
still
liable.
He
should
have
exercised
greater
care
to
keep
his
loans
separate
as
he
once
did
and
if
an
error
was
made
he
should
have
realized
this
and
sought
a
correction
long
before
the
time
it
took
in
this
case
for
the
matter
to
come
to
light
and
be
taxed.
The
end
result
then
is
that
this
appeal
is
dismissed.
Appeal
dismissed.
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